Question:
Discuss about the Increasing Irrelevance of the World Trade Organization.
The World Trade Organization formed in 1995 was a evolved version of the General Agreement on Tariffs and Trade as countries all over the world sought a platform to discuss and regulate international trade (Curtis, 2012).
The scope of World Trade Organization extends not only to regulating trade tariffs and barriers but also to serving as a body that negotiates critical issues like Intellectual Property Rights, support trade policies in member countries and is the Dispute Settlement Body for international trade (Curtis, 2012) To some, the WTO is the leader for trade liberalization in the world. (Meltzer, 2011)
The latest round of negotiations by World Trade Organization started in Doha in2001 and culminated in Bali on 2013. The set of agreements and procedures that were concluded at the conference were compiled as the Bali Package. (World Trade Organization, 2013) However, the year 2008 was a critical point in the history of world trade. As the Global Financial Crisis hit the world in 2008, countries all over the world also saw the negative effects of excessive globalization. The brief period inflowing the crisis saw an increase in protectionist voices all over the world. (Bussière, Pérez-Barreiro, Straub, & Taglioni, 2010). For example, the increasing trade of USA with China was views as a reason for unemployment in the USA, thereby, views to be a cause of the crisis. (Meltzer, 2011)
The trend of lower trade barriers has started since 1950s. This trend has continued and has been lower trade barriers. During the period of 2008 and 2014, the “ Tariff Trade Restrictiveness Index” has marginally fallen for most regions, except ‘transition economies (group of some centrally planned economies making a shift to market economy)’. Similarly, the trend of fragmentation of global supply chains has also increased, implying that more goods and services are now being produced and integrated outside their home country. (United Nations Conference on Trade and Development, 2016) Yet, the Global Trade Growth, in the post crisis world has been very slow, some even questioning if global trade has peaked. (Hoekman, 2015) Many have questioned the relevance of the World Trade Organization in the post crisis world. (Dadush, 2014) while some have credited the WTO for being able to convince countries against protectionism. (Meltzer, 2011)
Table 1″ Tariff Trade Restrictiveness Index (TTRI)” by Importing Region and percentage change between 2008-2014
|
Importing Region |
Index value |
% change in Index |
|
East Asia |
2.6 |
-0.7 |
|
South Asia |
7.1 |
-0.6 |
|
West Asia and North Africa |
1.6 |
-0.3 |
|
Sub-Saharan Africa |
3.9 |
-0.7 |
|
Latin America |
1.1 |
-0.6 |
|
Transition economies |
0.4 |
0.3 |
|
Developed countries |
1.8 |
-0.3 |
Given below are some of the changes seen in the working of WTO due to change in world trade:
One of the key advantages that member countries have as a part of being WTO members is that they can access foreign markets with lower trade barriers. Countries that are not a part of the WTO would have to negotiate individually. In a post crisis world, this advantage does not hold much weight. It has been observed that in the current environment, countries are increasingly turning to specialized bi-lateral and multi lateral trade agreements (Dadush, 2014) . Logically, countries have greater freedom to tailor their trade agreements to suit their needs at the multi-lateral and bi-lateral platforms than in one size fits all treaties that are offered by the World Trade Agreement.
The USA and European Union have recently launched the Trans- Atlantic Trade and Investment Partnership with the inclusion of countries like Australia, New Zealand etc. Similarly, Asian countries like India, Japan, Korea have formed the Regional Comprehensive Economic Partnership. (Wilson, 2013)
In November 2008, at the WTO conference in Geneva, member states assured that they would not resort to following protectionist measures due to the crisis. (Bussière, Pérez-Barreiro, Straub, & Taglioni, 2010). However, the post crisis world has forced countries across the world to see the negative effects of globalization and caused them to negotiate harder to protect their domestic interests.
The same period has also seen a change in the structure of the trade of the world as the output and trade levels of emerging market economies like BRICS countries grew. (Altinkaya, 2013) (United Nations Conference on Trade and Development, 2016) While countries like USA seek to retain domestic agricultural subsidies to maintain exports, countries like India and China seek to retain agricultural subsidies to protect food security. (Banik, 2013) Similarly, developing counties like India and Brazil believe that strict Intellectual Property Rights restrict the import of inexpensive technology which is required to fuel critical sectors and industries like agriculture and pharmaceuticals. (Riker & David, 2014) Countries are increasing find it difficult to agree on various issues relating to trade in goods and services, given the increasing complexity of interest, regional and economic alliances etc. At the WTO, countries tend to negotiate like pressure groups such as G-20, African Union etc. One of the prime examples of such complexities is multi –layered disagreements in Non Agricultural Market Access discussions. The clashing interests of various countries make it difficult to reach a comprehensive agreement of trade barriers. (Wolfe, 2013)
Different countries are at different stages of development. Hence, treaties ratified by the World Trade agreement must he integrated enough to ensure that interests of developed, developed and least developing countries are not sacrificed. (Dadush, 2014)
Conclusion: The Way Forward for World Trade Organization
Rise of Pluri-lateral Agreements and Changes in the stance of the WTO
The result of the trends reflected above is the delayed ratification of the treaty or a treaty that does not have teeth, or “pluri lateral agreements” However ,“pluri lateral agreements” seem to have disadvantages. Countries that were not a part of the negotiations, often, may not see the virtue of imposing upon themselves rules that were negotiated and discussed by other parties. (Dadush, 2014)
The non-binding nature of the Bali Agreement can imply that the structure of WTO has become more flexible. The flexibility in such structures allows countries to accommodate the domestic pressures without choose between domestic growth and international trade. (Dadush, 2014)
References
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